Stockland Sees Funds from Operations Growth Slowing in FY18

By David Winning Features Dow Jones Newswires

Australian property company Stockland (SGP.AU) said its annual net profit rose by 34%, although its growth in funds from operations would likely ease this year partly due to higher energy costs.

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Stockland reported a net profit of 1.2 billion Australian dollars (US$939 million) for the 12 months through June, up from A$889 million a year earlier.

Annual funds from operations, the company's preferred measure of ongoing operating profits, increased by 8.5% to A$802 million. Funds from operations per security rose by 7.4% to 33.4 cents, above tightened guidance for growth of 6-7% provided in February.

"Our Residential and Retirement Living businesses achieved record results, and Commercial Property delivered a good performance across the different asset classes, despite challenging conditions in the retail market," said Chief Executive Mark Steinert.

Some analysts are worried that Stockland is vulnerable to a softening in Australia's housing market as regulators act more aggressively to curb risky lending. Further clouds hang over the Sydney-based company's shopping mall portfolio as debt-laden consumers grow leery of spending in stores and Amazon.com Inc. (AMZN) readies a retail offering that could stoke online sales.

Stockland said it expects funds from operations per security to grow at a more-muted 5.0%-6.5% in the current fiscal year, with growth skewed to the first half due to the timing of residential settlements.

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"We expect FY18 funds from operations growth to be slightly lower than FY17, primarily due to non-Sydney office let-up assumptions, higher commercial property outgoings, particularly electricity prices, and lower retirement living development profit reflecting project timing," Stockland said.

It forecast a 4% increase in distributions in the 2018 fiscal year to 26.5 Australian cents per security.

-Write to David Winning at david.winning@wsj.com

(END) Dow Jones Newswires

August 15, 2017 19:30 ET (23:30 GMT)